I could see I was going to get nowhere and the $200 it is going to cost me to have a certified electrician put "C" shaped conduit over the wiring is likely less that some other thing he will come up with if I complain. .

^^ This. Not worth the time effort or headache to fight it. Unfortunately FHA appraisers and loan underwriters are GOD in real estate. Is it right? Who knows but in the grand scheme of a real estate deal $200 isn't worth worrying about.